00:01
A statement is given here regarding the possible outcomes for an increase in the output per worker.
00:16
So by output we mean production here.
00:20
And we're basically looking at three scenarios that we are going to form as the, that's going to form the basis of our analysis.
00:30
So you're going to be looking at the increase in the output per work of a 10 % increase.
00:43
And we're going to be looking at how that affects, how its effect on employment.
00:51
And that's the first part.
00:54
And its effect on output prices.
01:00
And finally, we're going to be looking at its effect on employer.
01:05
Profits.
01:10
Okay, so the several assumptions that need to be made because the statement says, output per worker is expected to increase by 10 % during the next year.
01:21
Therefore, wages can also increase by 10 % with no harmful effects on employment, output prices or employer profits.
01:30
Discuss the statement.
01:32
Okay, so this statement makes, it takes on a lot of assumptions.
01:38
So we start that.
01:39
Analysis by looking at the first one which is employment so basically when output increases the assumption is that wages can also then increase by 10 % with no harmful inflicts on employment but it has to be understood that the wages can be labor can be direct can be indirect that's the first thing so when we compare the direct labor versus indirect labor or we can simply say the overhead or we can just put indirect labor.
02:25
So we compare the two.
02:27
One can tell that it's going to depend on how the proportion between these in order to find the direct impact of a 10 % increase in productivity in the, you know, in the in what way that will affect direct labour and indirect labour.
02:49
So for instance, if it is such that the main component of expenses is direct labour, then indeed a 10 % increase in the productivity will closely, will not likely have much impact on the employment we are likely to find that there's going to be, yes, indeed 10 % of our salaries can also be deemed to be commensurate.
03:27
But the problem is increase in productivity does not necessarily translate to increase in sales.
03:39
So that is a big assumption that is being made by the statement.
03:46
To say the increase in productivity easily translates to increase in cells volume, although it is mainly the case.
03:54
But if you are going to be in a competitive environment, it is not going to be that simple.
04:07
For instance, if production were to increase, and production increases and the sales volumes because of the prices, increased competition, the the selling price actually drops then you are not going to really have much in in terms of because of competition you are not really going to this is not really going to work much in terms of employment businesses would actually reduce employment in order to then cover the the cost of production since they take comfort in the increased productivity of the worker...